In this episode of “The Land Academy Show,” hosts Steven Jack Butala and Jill DeWit reveal their proven strategies for surviving a recession in the real estate market. They share their personal experiences of navigating tough economic times without a property acquisition pipeline, offering practical advice and key takeaways to prepare you and your land flipping business for economic downturns. Don’t miss these valuable insights that can guide you in making informed decisions during challenging times. Tune in now to learn how to thrive in any market condition!

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Surviving A Real Estate Recession Without An Acquisition Pipeline (LA 2017)

This is episode number 2,016. We are talking about when Jill and I were poor. This is our story of getting caught in the real estate recession without a property acquisition pipeline and a lot more. This was not that long ago.

Do you know what’s interesting? I never worried. I don’t know if that’s nature or nurture. I don’t think you have that same feeling.

I really want to cover that topic because it’s important for people. The recession is here, and it’s going to get much worse from a real estate standpoint way before it gets better. In the next three years, we’re going to go through this.

It’s going to be interesting.

There are a lot of things you can do before it gets bad. I want you to learn from my mistakes. That’s my point.

Surviving a recession isn't just about having money; it's about strategic thinking and making the right moves before it gets worse. Share on X

That’s why you’re here.

Answering A Land Academy Community Question

Each week on the show, we answer a question from our Land Academy Member Discord forum. We take a deep dive into a land-related topic by popular request from our Land Academy community. Let’s take one question.

Jenny wrote, “I talked to a seller about a piece of land that I want to sell from my offer price of $11,752. It’s 2.65 acres with a house, a chicken coop, and a workshop on it. There’s no septic, though or any kind of sewage. In the area, it’s about $20,000 per acre without anything on it in the state of Pennsylvania. It’s right off of a main road.

I asked why they were selling it, and they said they couldn’t keep it anymore and that the kids didn’t want it. They need the cash fast. They sounded emotional. No back taxes, etc., so I’m sending someone out there to take a look at it and take a lot of pictures. I’m also pinching myself a little bit. I’m wondering what I’m missing. I flipped derelict houses before, but they said this is in livable condition. At this price, I don’t see how I can go wrong. Is this the model working? My question to the group is, what could go wrong here? How can I lose?”

Nothing.

That’s it.

Land Academy is working for you or you’re making it work for you. It’s interesting. Let’s tap into a topic. I have the same kind of doom and gloom reaction, “What am I missing here? Everything worked. I followed what I was supposed to do in Land Academy. I worked through the education. I reached out to people in Discord as you’re doing, and it worked. I must be missing something.” Jill would be jumping up and down, saying, “Let’s get this thing closed.”

That’s right. I’d be like, “Done deal. Let’s go.”

She’d be like, “Let’s get on to the next one.” That’s my advice to you here. You’re not missing a thing. It’s all the regular stuff. Make sure you get an inspection before you close. It sounds like you’ve done flipped house deals before. Make sure it meets with your approval. There’s going to be some stuff in there. I’m sure you’re not going to renegotiate the price. You’re probably going to sell this for $50,000, $60,000, $80,000, or $100,000.

Challenges With Imperfect Properties

Do you know what’s interesting about this? This taps into people seeing a less-than-perfect structure, whether it’s a falling down mobile home or a house that’s old or it’s not hooked up to anything. It’s like, “We have running water, but we don’t have this.” Sometimes, people see those as problems. That could be what’s going on in the seller’s mind. It’s not a perfectly beautiful model tree piece of land. It’s got the structure on it.

In reality, we both know that it’s all positive. If it was rural, vacant, stupid, with nothing on it, not even mode, it’s worth $20,000 an acre, and you’re getting a two-and-a-half acres kind of thing with a structure on it. The big picture is when you get to these situations and you’re concerned about what condition this is in, you’re doing everything right, Jenny. Sit back and say, “If it was vacant land, would I still buy it for $11,000?” If the answer is yes, you power through. No matter what, anything on it is a little asset. I don’t care if it’s a falling down shed or a couple of rusty parked cars there. Somebody’s going to want them.

I agree.

Were you going to add a little something to this? Is that what you’re doing?

What I’m doing is looking up the name of the person who wrote this because I’m not sure it was Jenny.

I’m sorry.

My bad. I apologize.

We’re calling you Jenny. We’re sorry we didn’t have time to find the exact name. It’s all good.

Here’s the thing. What Jill and I are famous for in our personal lives is complicating things and overtalking things with each other. It doesn’t happen in business for some reason because we’re like, “Let’s buy it or not,” and, “Let’s get it done.” Don’t overthink it. I would personally get this thing under contract. Go through the motions of buying the piece of property and reselling it, which sounds like it’s going to happen fast. Especially in this economic environment, this is cheap housing. This is affordable housing. I would sit down with myself, figure out what I did right, and try to duplicate it. You did it right. Maybe you seek out properties with structures on them instead of faking land.

What was the percentage? Was there a percentage of improvement that snuck into your mailer that you didn’t know about? Look how you won.

I’d take a look around Pennsylvania, the Midwest, or whatever and see if there are a lot of properties like this. Maybe the assessor knows that there are improvements or they don’t know. Maybe it’s showing up in the data, but it’s not. Dig in and duplicate it. This topic is about when Jill and I were poor. It’s our story of getting caught in a real estate recession without a property acquisition pipeline.

I’m going to say two things. Number one, this is not cool.

This topic?

Yeah. The topic is not cool, but it’s real. I want to make a point, too. That’s one of the things about us and about Land Academy and why you’re here. We are not brand new. I’ve not done my first 100 deals, but I’ve been at it for a year and a half, and I’m the best. You’ve been at this for 30 years and me 15. When we’re talking about when we were poor, we’re talking about the darkest one because we have both been through recessions. I’ve been through a major one in this recession. You have more under your belt. That’s the whole point. I hope this is why you’re tuning in. You want to be ready. You don’t want to be stuck in a pickle. We’re going to talk about all the different things. I know you have a whole speech here. To be stuck with a bunch of property that you’re financing is the last thing you want. Go right ahead.

In the beginning, in the early ‘90s, I casually bought and sold real estate in different types of forms, whether it be houses or commercial property. I started selling land a little bit later in the ‘90s and realized, “This is it.” We made tens of millions of dollars from the late ‘90s to around 2007 and 2008. This was before I met Jill.

Everything was going great. We were the lead seller on eBay. It was about the only place that we sold property because it was so efficient. We would post a 30-day auction. It would sell. We would double or triple our money. My whole life was focused on being a land acquisition expert for that decade, and we were great at it. In fact, I’m sure we were the best in the business. We were invited to meet the executives of eBay on more than one occasion in Washington, DC.

You were making them rich. You had auctions closing hourly. Back then, I don’t think it was a percentage. It was a flat fee back then in closing costs. You were helping make them rich, which is nothing to sneeze at you. I want to brag for a second.

The name of this episode is not We Were Cool. It’s We Were Poor.

I want to talk about the peak and the valley. You’re getting to the valley. The peak was pretty high. You had auctions closing. You were doubling and tripling more of your money on these things. It was a machine. We didn’t have eBay issues back then. Everybody was all excited, I’m sure. Go ahead.

Single Point Of Failure In Sales Channels

I lived on a yacht in San Diego. I was very successful financially. It was a machine. We had no real competition. What we had was a serious single point of failure, and that single point of failure was our sales channel, which was eBay. This recession started to happen in 2007. The same things that were happening were happening in early 2007. Houses started to foreclose based on what we’ll call irresponsible lending. We’ll leave it at that.

All kinds of things happened. Ultimately, banks started foreclosing. It was serious based on those irresponsible mortgages they were lending on and backing. It didn’t affect us. I had the greatest false sense of security ever. We sailed through 2007. 2006 was our best year. 2007 was almost our best year.

2008 rolled around and I was beating my chest sometimes and saying, “From all the terrible things that are happening in the real estate industry, we’re immune. I figured it out. Nobody else has ever purchased land, sold it on eBay, and auctioned it off like that at breakneck speed. I’m going to go through this.” That’s not what happened.

What happened is the recession got so bad that people didn’t have any extra money to purchase what I realize are unnecessary assets. When you buy a piece of land, it’s not necessary. It’s a luxury. It’s some kind of thing. You’re buying it to build a house in the future, as an investment to resell, or leasing. It caught up, people stopped bidding and buying real estate altogether. For whatever reason, Jill and I met each other around this time. I don’t know why. I still think about this.

It is funny.

I was defeated. I had no commercial debt. I had no debt associated with the business and a ton of land with no debt.

Those were all paid for.

I had multiple houses, a yacht, and two office buildings. All of those had responsible-type loans, but we couldn’t service them anymore. We had a huge payroll. We had a lot of people working for us managing these auctions. It imploded on itself and I had to manage all of that. There were a couple of times when I thought I might have to file personal bankruptcy. We were poor. That was it.

It was dark.

Enters Jill and says, “Look at all these assets that you have.” I couldn’t see the forest through the trees there. I thought my life was over. We sat down after we got to know each other for a while. It was probably a year or maybe it was close to it. Either way, it doesn’t matter. We worked out how to liquidate these assets through Jill’s sales talent.

She got out my Rolodex or my whole contact list of people who were in the business and were still trying to make it on eBay. None of them were doing it well. She started negotiating deals to sell this property that we had so that we could breathe and live and it worked. What we ended up doing was changing the process of how we sold property, not how we bought it. That has always worked.

Buying real estate the way that we buy it works in the worst of times and the best of times. You have to change how you’re selling property and the types of real estate you’re buying and selling based on the economy. I’ll get to that in a second. Together, we looked at these lists of asset types that we had and she liquidated them. Some of them were at a loss. I didn’t care.

Can I jump in here and give my recollection?

Sure. You tell yours.

Let me tell my recollection here first. You were not happy. Let’s say that. You were busy with other things and keeping personal wheels on the bus. My recollection is you had this whole extra computer that you sat me down and logged me into. You built this whole system of acquisition, engineering, and sales into this computer system. It was beautiful what you designed. You said what was almost a, “Knock yourself out.” It was like, “Here’s what I did in the past. Here’s what worked. This is what good photos look like.” You gave me all the framework and the instructions and then walked away because you were mad, and I don’t blame you.

It was certainly not at you.

It was like, “Let’s see if anything happens.” There were hundreds of properties in there that you had written off. You were like, “That’s over. That ship has sailed. The county is going to get them back. Who cares?” I was off-putting things together, figuring it out, making postings, and selling things. I was calling people, talking to them, and working out deals.

I remember you coming to me after a month or two or something. We had a separate little bank account. I was putting all the money in a separate little bank account under your direction. I’m sure you thought there’d be $100 in there, but you came along and you were like, “How’s it going?” There was a lot more than $100 in there. You were like, “What happened?”

I remember this.

Learning To Follow A Proven System

I remember saying, “I did exactly what you told me to do.” That’s all that I did. That’s one of the things that still stands the test of time, too, with Land Academy. Forget what you think. Forget what you know. Forget what your gut is telling you. Put your head down. Follow his steps. I did, and guess what? It paid off. It worked. It was great. I was really good.

For whatever reason, in life, I don’t necessarily always follow all your directions. I will follow all your directions and still do the things you are an expert on. This is one of the things that you know very well, how to buy and sell land. I did what you said and it worked out great. Maybe you bought something you wanted to sell for $10,000 and we were selling it for $6,000. It wasn’t a big deal. We were still keeping food on the table.

That’s a great example.

We were moving things forward. That’s what happened. I don’t remember having any big losses. I remember not making as much money as we hoped we did, but who cared? They were all paid for a few years ago. It didn’t matter. We sold them, and we never had to go through some of the drastic measures that you were preparing for.

Here’s what happened. That was the low point. Jill has described the low point. She helped us crawl out of the cash crunch hole. What was happening in the economic environment back then is very similar, if not almost exact, to what’s happening now in 2024. Back then, people were encouraged to sign what were called subprime mortgages. It was a variable-rate mortgage that had a low introductory rate. It was below prime. Thus, the subprime name. It pretty quickly caught up to whatever the prime rate was. It was variable.

It never planned out, so it was easy to sign these loans. It was easy to get people to sign these loans because their payments were so low. They were below regular interest rates. Guess what? They’re called adjustable-rate mortgages. 3:1 and 5:1. They are fixed. All the laws changed because of what they called predatory lending back then. It doesn’t matter what it was. What it’s called is variable rate mortgages, which are 3:1 and 5:1. You have a locked-in rate.

We have had amazing interest rates over the last several years. For 3 years, you have a 3% mortgage, and then it catches up to the rate of 7% or 8%. 3:1 and 5:1. That happens in 3 years or 5 years. If you signed a mortgage back a few years,  your mortgage is going to double. This is going to happen again. Do I think there’s going to be massive foreclosures across the board? No. That’s what there was back then.

What we did is she got our cash balance up to where it should be. We bought and sold a few houses. We renovated them and made some dough.  The last one that we did, we moved into it, so then we didn’t have any debt. We had no debt personally at all. I renegotiated everything and liquidated the assets with the lenders. I was working on that and she was working on generating cash.

At the point where she generated the cash and I got rid of these other loans, the office building loans and things like that, we started to buy foreclosed houses for $40,000 and $60,000 and sold them for $60,000 to $80,000 to $100,000. Those houses are worth $300,000 now. They were worth $200,000 or $300,000 before we started this. We knew these assets. This is the exact same thing that’s about to happen over the next 2 to 3 years. We made very good money doing this, and we will again.

Jill and I wrote House Academy. Go to HouseAcademy.com. It’s about how to buy these houses using data. You can go there and check it all out. The land is last. It’s not the first. The land is the last in line to see the horror. We bought tons of land way below. People were foreclosing on houses. They didn’t care if they had land. If you send them an offer and say, “I’d like to buy your land for $5,000,” and it’s worth $180,000, they’re going to sign it.

They’re like, “Get it out of here.”

They might be filing personal bankruptcy at that time, signing the offer, and saying, “Can you pay in cash?” We were poor and we dug ourselves out of it. Fortunately for me, I met Jill. She brought something to the table that nobody in my life had, including me.

I want to talk about the big takeaways here on how you can really prepare yourself. Number one, pay cash for stuff. What are the things that we did that saved us? One, they were all paid for assets. We had no loans on anything. It’s certainly not personal.

You don’t want debt. You don’t want institutional debt. If you have institutional debt, you have about 12 to 24 months to get rid of it. If you don’t have a fixed-rate mortgage, attempt to solve that somehow. Take a look at your mortgage, read it, and see if it’s going to change. Plan for that day. There’s a day. In one month, your mortgage will be a couple grand and the next month, it’s going to be $4,000. Please find out when that is. You can do all kinds of stuff with your bank or with a different lender by refinancing interest-only refinancing or whatever. What else are the big takeaways?

I’m trying to think here. You wrote an email. This is something to think about. I’m going to end it on this one about that email title that you had. We paid cash. You have to be flexible and roll with things. If I had to pick 3 things, 1 is everything was paid for. Two, we cut our expenses down to be very reasonable. I don’t care if you’re living in a townhouse or whatever it is.

In tough times, remember: Pay cash, cut expenses, and stockpile. Flexibility and preparation are key. Share on X

Have everything paid for. Knock it off with what you think you need to have. You don’t. The third thing is to get your cash together and be ready to buy some stuff. That’s what we were doing, too. We weren’t taking this money and putting it into something stupid. We’re slowly and methodically building up more inventory to be in a better position for the next time.

Impact Of Layoffs And W-2 Job Security

Test yourself. Test the things in your life for a single point of failure. If you have a lot of customer concentration in any business, make those changes. Assume that you’re going to lose that customer. As much as I hate to say this, another great example of a single point of failure is a W-2 job.

That’s true.

You get laid off.

What are you going to do?

You need to plan for that. You need to not be shocked like the rest of the world when they get laid off. The economic outlook for W-2 positions is dire.

Do you remember the number of people who were in Land Academy pre-COVID? There were a number of people I could think of. I could rattle off their names too. They were people who did really well and came to Land Academy for whatever reason. It was probably because they didn’t want the W-2. It was pr-COVID. They were in Land Academy learning how to do this. They were like, “This is great. I have all these options. I have more options now.” COVID came and they got laid off. They were saying, “Thank goodness I had this. You guys taught me how to keep food on the table.” The same thing still applies.

A single point of failure can sink your business. Diversify your sales channels and customer base. Share on X

Think about who’s in your life and whether or not they can handle that professionally and socially. I had people in my life when everything hit the fan that we were not compatible. It’s not in their makeup to manage negative cashflow and tragedy. For whatever reason, Jill’s hardwired to change gears at any given time and repair stuff or completely be like, “Let’s try something new.”

Thank you. I want to give you some credit too, because one of the things about you, and this will help everybody too, is you come up with amazing ideas. You’re really good at building out a business plan and putting in really good, solid numbers to see if it would work. We then do it and implement it. You were great at that.

For basic numbers purposes, we had to entirely and completely restart our lives, Jill and I together, in 2010. We did all these deals. All those statistics are true, but the fact is we had nothing in 2010.

We have a big staff to manage all the Land Academy parts, but there was a time when we were the staff. We were a staff of two.

I say to our staff all the time, “I’ve had every single one of these jobs and I failed at every single one of them. That’s why you guys are here because you do it better than I do.” That’s true.

This is good. This has been a great conversation. My ending on this was about what you have to look forward to. You’ve heard what we’ve been through. We’ve given you our experience, tips, and things that we learned along the way so that you can watch, prepare, and make these changes. There’s a silver lining when this happens. You titled an email to some investors that we work with. What was the exact title?

Fortunes are made during economic downturns. Some of the greatest fortunes ever were made out of necessity. You need to eat. It’s like, “That thing I’ve been thinking about doing for fifteen years, this is the time I’m going to do it and I have to make it work.” We had to make that work, and we did.

Great fortunes are made during economic downturns. Be ready to seize opportunities when they arise. Share on X

Be thinking about what you can do. Think ahead. What other property type or what else is on the horizon? What partner could you bring in? Bring in that money guy.

That’s why you’re part of the Land Academy. There are tons of people in this group, Jill and I included, that have a lot of money.

I want to place it.

We are waiting for this to start to really tank where there are amazing real estate deals out there. Our checkbook is way open for that stuff. Please incorporate buying and selling other property types, specifically freestanding houses and predetermined markets, and add them to buying and selling land when you go through this. That wasn’t inspirational enough. Do you have something other than that that’s inspirational enough?

Importance Of Partner Communication

I was thinking about how important it is to be a united front. That’s it. This happens in the good times and the bad times. You have to be a united front. It’s so important. You need to pause and have those discussions. As you’re heading into stuff, you need to have temperature checks while you’re in the middle of it.

On the way out of it, make sure you’re coming back out of it and you have some positive stuff happening that you’re on the same page with what you’re going to do going forward and how you’re going to spend it or reinvest whatever’s going to happen. Not being on the same page will sink the ship right there, too, because one of you is rowing one way and one is rowing the other. It’s never going to work. That was a critical thing for us.

We still have regular partner meetings. We still call them that. We make sure what we’re doing and our goals are the same. He’s never going to send out a mailer and I’m going to be surprised by it. I know what’s going on. If we’re pivoting to a new property type, a new acquisition type, or something, I’m going to know because I’m going to be ready for it and vice versa. When things come in and I’m dumping a lot of money on something, I’m not going to surprise him. There are going to be meetings. We will talk about it. That’s my inspirational thing. Do whatever you have to do to make that other person feel comfortable and understood, and they will rally with you.

It's crucial to have regular partner meetings to ensure you're on the same page and united in your goals. Share on X

We got cut down to our knees in 2009 and ‘10. The result of that for me personally was I told myself several times during that time while that was happening, “If I ever get out of this, I’m going to do stuff differently.” It’s 14 or 15 years later and we have seen the result of me making those changes. One of the things is to stockpile cash and never have any debt ever unless it really makes sense from a locked-in perspective. You’re spending 20% down on a $10 million asset. You write a $2 million check and the $10 million asset’s worth $20 million because you knew it was.

I put this question in here for a reason. It’s because it’s very pertinent to this topic. This guy sent out a bunch of mail. He got somebody to sign it, sent it back, and said, “We don’t want the asset anymore. Neither does my family. We’ll take $11,000,” for what’ll probably end up being maybe $60,000 to $80,000. Those are the kinds of deals that Jill and I do.

If we did all the deals that we knew we could make a 20% return on, we would have way more money than we have, but that’s not what we do. We only do surefire deals. That’s one of the results of going through that recession. We were stockpiling on every deal. A certain percentage of the money that we make goes away. This is happening. We’ve stockpiled a bunch of money because of that. We are actively, because of this recession, buying and selling houses, mobile homes, and things like that.

All the stuff we talk about in Land Academy, and we will in a little while on our member call. It’s not that that wasn’t informational enough, but do you have any of the little nuggets that you want to share with us?

This was a ton of nuggets. What other nuggets?

I didn’t know if you had any other little informational things you wanted to share.

That was it. Stockpile cash. That’s my inspiration for this episode.

My informational thing is don’t spend it.

Stockpiling Cash And Minimizing Debt

Don’t take on any debt. Do you need a yacht? No. I don’t need a yacht, so we don’t have a yacht. We have a souped-up van. Join us again for another interesting episode. You are not alone in your real estate ambition. We are information.

Also, inspiration.

To buy undervalued property.

Important Links

• House Academy